I mention all of this, because the European banking system seems to be repeating the exact same policies today, only two years later.
We’ve already seen the phony “stress test” charade along with the “all is well” proclamations. Now, the largest, most venerable European banks are starting their own version of the “we need capital, but all is well” tightrope act.
3 Out Of 3 Analysts Agree: Basel III Will Guarantee Their Bonuses For 9 Years In A Row, As Banks Win AgainSubmitted by Tyler Durden on 09/13/2010 08:15 -0400
No surprise the reaction across Wall Street is strong to quite strong on the latest regulatory farice out of Europe, especially since our initial read of a 20x leverage cap was in fact low: the 3.5% minimum common equity ratio by 2013 means leverage will be just under 30x, or enough for every bank in the world to pull a Lehman, which blew itself up at roughly the same leverage. All who think European banks will survive through 2019 with this type of leverage should look into investing in these great companies: New Century Financial, Countrywide, and IndyMac.
- Asian stocks, oil rise as China output, retail sales expand; Yen declines.
- Banks worldwide face stiffer capital requirements as Basel forges accord.
- British unions warn government that public spending cuts will spark wave of strikes.
- China set Yuan's reference rate at 6.7509 vs USD - lowest level since 1980s.
- China shares, led by tourism, rise amid stronger economic indicators for August.
- China's Industrial production rises 13.9% in August, betters 13.4% growth of July.
- Economy recovering faster than expected across the European Union, but remains fragile.
- Hong Kong housing risks may exceed 1997 on rising rates, HKMA's Chan says.
As predicted in May, DB honors its obligation to flush good shareholder capital down the toilet.
Earlier today, the Basel Committee on Banking Supervision committee released Basel III guidelines, which are expected to have a material impact on curbing bank risk appetite... when they are fully implemented in July of 2019. Luckily by then the last thing on people's minds will be whose bank's Tier 1 capital (which includes such intangible "capital" items as mortgage servicing rights and preferred stock) was being misrepresented for the past 9 years, as real cap ratios are discovered to have had a decimal comma following the zero. In the meantime, here is the summary of the proposed changes to bank capitalization requirements, which apparently were so "stringent" that the Fed issued a Sunday afternoon press release patting itself, and the entire financial system on the back, for pulling off another multi-trillion toxic debt David Copperfield disappearing act. So for the next several years, banks will need to demonstrate a stringent 4.5% Common Equity cap ratio, in other, will be allowed leverage over 20x. And this is the "stringent requirement" that has forced Deutsche Bank to sell over $12 billion in new stock to raise capital. Furthermore, the coincident take over of Post Bank will surely allow DB to terminally confuse
its investors as to what its final pro forma numbers are supposed to
represent, and, more importantly, what the unadjusted actuals really
are... Surely this example of just how woefully undercapitalized European banks are (consider the DB action a stark refutation of the "all is clear" statement proffered by the Stress Test farce from July) will be enough to get the EURUSD back to 1.30 overnight.
Last week I forecast that the stock market would likely rally to test its 200-DMA. We didn’t quite get there, but that’s largely due to the fact that no one was actively trading the market last week.
Indeed, thanks to a holiday week that entailed both Labor Day and Rosh Shoshanna, market volume was truly abysmal. In fact, last week saw even lower market volume than during April 2010 top, which should give you an idea of just how few participants were involved:
Rumors circulating in the market that the biggest German bank, the one whose assets are about as large as the GDP of its host country, is considering a share sale of up to €9 billion. DB is rumored to have approached banks about arranging a stock sale, although the firm has still not decided to whether to pull the trigger. This development is nothing less than a direct response to Basel III which is expected to require European banks to shore up tens if not hundreds of billions in new equity capital. And as usual the first one loses the least. This only means that all the ugly toxic waste accumulated under the rug in Europe's financial institutions is about to emerge.
Cover your ears. There are a lot of "I told you so's" coming down the Irish banking pike
Meredith Whitney Sees A 10% Drop In Wall Street Headcount And "Dramatic" Declines In Payouts In 18 MonthsSubmitted by Tyler Durden on 09/07/2010 18:09 -0400
And you were wondering why the SEC and certain politicians with extensive connections to the financial services lobby are starting to stir now that it is common knowledge that every single hedge fund and trading desk's woes are a function of HFT run amok (which is exaggerated BS of course, but from Wall Street's darling, HFT has now become the one thing everyone loves to hate, and blame their own underperformance on). And as we suspected, there is a far more structural issue underlying the recent faux-move to restore confidence in markets, namely imminent pain for Wall Street headcounts... and bottom lines. According to Meredith Whitney, who had been relatively quite in recent weeks, Wall Street faces the departure of about 80,000 staffers, or 10% of all, within 18 months, not to mention a major drop in Wall Street compensation. The reason is the same as the one we pointed out earlier: slowing revenue growth, primarily due to the complete collapse in trading volumes, as computers have used their binary elbows to push everyone else out of the markets, and with Wall Street's primary revenue model now being exclusively reliant on trading, this is equivalent to a partial extinction event as many trading firms will have to close. This also means that the New York City economy is facing another major solvency crisis as tax receipts are sure to plummet.
Reality is the great antidote of hope. Whenever my colleagues and friends ask me for my global economic outlook, by the time I’m done, they always provide a cheeky response about the depressing nature of my outlook. However, the outlook doesn't have to be depressing at all for those willing to face reality and take a proactive stance.
- Asian stocks rise on China manufacturing, Australia's growth; Yen weakens.
- Australian economic growth accelerates more than estimates; Currency gains.
- China's manufacturing expands at faster pace in Aug - rises to 51.7 from 51.2.
- Currency trading tops $4 trillion a day as dollar's share drops, BIS says.
- FDIC finds more than a tenth of U.S. banks - 829 - at risk.
- Pennsylvania's capital of Harrisburg to skip a $3.29M payment on its debt.
- Treasuries decline as Asian stocks advance, US to announce auction size.
- US consumer confidence rose just 2.5 points in August, to 53.5.
Some stunning bearish commentary from the staple CNBC goto analyst (Joe Lavorgna as if the clarification is needed) when worthless permabullish commentary is required. "We expect Q2 real GDP growth to be revised down sharply from +2.4% to +1.0% because of lower inventories (-$25B) and construction (-$4B) as well as a larger trade deficit (+$15B)." In other news, Zero Hedge still calls, and has for about 4 weeks now, a final Q2 GDP of under 1%, and under -3% when the impacts of the stimulus are excluded.
Though the official London Gold Pool disbanded in 1968 when it suffered massive outflows of bullion trying to frustrate free market forces that were manifesting themselves as insatiable demand for the metal, someone is now operating, albeit covertly, a second London Gold Pool. However, what I will show unequivocally in this article is that this “Second London Gold Pool” is about to suffer the exact same fate as the first one did. - Adrian Douglas
With endless lies bombarding the average American from all sides seeking to instill a false sense of calm that all is good (but, but, the market is up and GM is IPOing today), it is wise to step back and consider the common sense signals that a double dip is if not here, then arriving on the next much delayed flight.
In 1919 the major London gold dealers decided to get together in the offices of N.M. Rothschild to “fix” the price of gold each day. While this was notionally to find the clearing price at which all buying interest and all selling interest balanced the possibility for market manipulation and self-dealing is inherently systemic in such a cozy arrangement. This quaint anti-competitive procedure continues to this day. In no other market in the world do the major players get together each day and decide on a price. Imagine if Intel, AMD and Samsung were to meet each day to “fix” the price of microchips, or if the major oil companies were to meet each day to “fix” the price of crude oil; wouldn’t there be a public outcry and a flurry of antitrust violation lawsuits? The “fix’ is not open to the public, there are no published transcripts of each fixing, and there is no way to know what the representatives of the bullion banks discuss between each other. The current London Gold Fix is conducted by the representatives of five bullion banks, namely HSBC, Deutsche Bank, Scotia Mocatta, Societe Generale, and Barclays. The “fix” is no longer conducted in an actual meeting but by conference call.